Why Multi-Family Buildings Make Great Business Investments

Over the course of modern history, there have been thousands of business models used to create new businesses and even more ideas behind these businesses. Not all businesses succeed and, in fact, statistics will tell you that far more fail, despite the perceived strength of an idea or model for a business.
So, what does that tell us? I can tell you that the deciding factor between success and failure in a business has a lot less to do with the quality of an idea and a lot more to do with how well the business is structured. Good structure means that the basic fundamental elements of business need to be given their due. These are:

· Properly identified scope and market share · Proper capitalization · Proper management

Without these things, a business is usually doomed to either fail or at least struggle to perform. When these elements are given the proper attention, businesses are usually heading in a direction leading to success. Since multi-family investment properties represent businesses unto themselves, let's look at their strength as businesses and thus put them to the business litmus test as you are considering their value for you.

First, we have the scope and market share concepts to consider. Basically, this tells you if there are customers out there who want your product. In the case of multi-family investment properties, this means determining whether there is demand for rental units in the location you're considering and at the price point where they will be profitable for you.

Your search and selection of multi-family properties in which to invest should answer these questions for you. In short, you should never invest in a building for which there is insufficient demand for units or for which standard rents produce an insufficient amount of revenue. The fact that you can determine the strength (or weakness) of your 'business' is a huge upside for multi-family properties as investments.

Next, we have the issue of capitalization. This issue constantly plagues business owners and usually comes down to revenue (i.e. how much is produced, how frequently, etc.). Again, multi-family properties are easily judged for their ability to produce revenue as their past performance is usually a solid indicator of how they will perform going forward. Few businesses produce the consistent kinds of revenue that you get from multi-family properties and, when they are purchased properly, they can be fantastic businesses for this reason alone.

Last, we have the issue of management to consider. Unlike many traditional businesses, where management is often both internal and also comprised of many people, personalities, and the like, multi-family properties are comparatively easy to manage. First, the business owner is often not the manager. This is generally a good thing. Second, there are professional management companies out there waiting to manage your properties for you. Third, managing a multi-family property involves few personnel and certainly few to no employees that you must manager personally. All of these things again point to multi-family properties as being good businesses.

When you sum it all up, multi-family real estate indeed passes the test of what it takes to succeed as a business model. The question then arises, 'When are you ready to pursue this proven business model?' It is out there waiting for you.